Understanding Student Loan Forgiveness Programs: Eligibility and Benefits

For many college students, loans are necessary to help pay for their education. According to the Education Data Initiative, 43.6 million Americans have federal student loan debt. The average undergraduate student at a public university borrows $32,637 to get their bachelor’s degree.

If you have federal student loans, you may be wondering if it’s possible to have them forgiven. Here’s a breakdown of loan forgiveness programs and eligibility information.

What Is Federal Student Loan Forgiveness?

The goal of federal student loan forgiveness is to alleviate the financial burden on graduates struggling with student debt and to promote accessibility to education.

Loan forgiveness programs could help lower or even eliminate federal student loan debt. Forgiveness might happen if the loan holder meets specific criteria, such as:

• working in public service
• teaching in underserved areas
• making consistent payments for a certain number of years

Additionally, some forgiveness programs are tied to income-driven repayment plans, where remaining debt is forgiven after a set period of time.

Career-Based Student Loan Forgiveness Programs

The most common student loan forgiveness programs are based on your career after college. Some of the top professions eligible for federal student loan forgiveness include:

• Public servants. If you work in a qualifying public service job, you may qualify for Public Service Loan Forgiveness (PSLF). PSLF forgives the remaining balance on Direct Loans for borrowers who work full-time for a qualifying employer in the public sector, such as government or nonprofit organizations. To earn forgiveness, you must make 120 qualifying payments.
• Teachers. Teachers who work in eligible low-income schools or educational service agencies could have a portion of their Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans forgiven. They’re eligible to receive up to $17,500 in loan forgiveness after 5 years of service.
• Servicemembers. Various branches of the military offer loan forgiveness programs for servicemembers, such as the Army Student Loan Repayment Program and the Health Professions Navy Loan Repayment Program. Eligibility criteria can vary based on the specific military branch and program. Generally, individuals need to be Active Duty servicemembers or members of the National Guard or Reserves.
• Health care professionals. There are several loan forgiveness plans designed to help health care professionals. The Nurse Corps Loan Repayment Program is one common example. This program offers to repay 60% of the participant’s total outstanding qualifying educational loans for an initial 2-year service commitment.

To learn more about which professions could qualify for federal student loan forgiveness, visit the Federal Student Aid website.

Income-Driven Repayment and Forgiveness Program

If you’re in a career that’s not aligned with federal student loan forgiveness programs, there are other options that could help. One possibility is an income-driven repayment (IDR) plan.

The Saving on a Valuable Education (SAVE) program is an IDR plan that calculates payments based on your income and family size. SAVE opens the door to a host of benefits for borrowers by:

• Cutting undergraduate loan payments significantly. SAVE reduces monthly payments based on discretionary income. That means student loan borrowers will pay a weighted average between 5% and 10% of their income based on their original loan balances.
• Dropping monthly payments to as low as $0. Borrowers who earn about $32,800 a year, for example, could see their monthly payments reduced to $0. This relief helps borrowers still repay loans while being able to afford essentials like food and housing.
• Preventing balances from growing. SAVE halts the accrual of monthly interest that isn’t covered by the borrower’s payment. Borrowers who meet their payment obligations won’t see their loan balances increase because of interest.
• Granting early forgiveness for low-balance borrowers. Borrowers with original balances of $12,000 or less will receive forgiveness after 120 payments, or 10 years. For each extra $1,000 borrowed above this threshold, borrowers must make an additional 12 payments (or 1 year of payments), up to 20 or 25 years.

More Loan Forgiveness Programs

One more possibility to help with student loan debt is to have your loan discharged, which means some or all of your loan balance would be forgiven. Your loan could be discharged only under specific circumstances.

• One discharge option is the Total and Permanent Disability Discharge program. Under this program, borrowers who are completely and permanently disabled can have their eligible federal student loans forgiven.
• Another circumstance that may lead to loan discharge is the closure of the school you’re attending. If your school shuts its doors while you’re still enrolled or shortly after you withdraw/complete your education, you may qualify for a closed school loan discharge if you have federal loans.
• The Borrower Defense Loan Discharge program offers relief to those who have been victims of deceptive practices by educational institutions. If a school has misled students or engaged in misconduct that violates certain laws, borrowers may be eligible for a discharge of their federal student loans.

Explore Your Options for Federal Student Loan Forgiveness

Millions of people are working hard to repay the student loans that made their education possible. As you make plans to repay your student loans, research your options to see if you qualify for federal student loan forgiveness.

For any remaining student loan balances, Navy Federal Credit Union has resources available to help make repayments more manageable. For more information, visit our Student Loan Resources center.